NCUA Will Utilize FDIC's Good Bank, Bad Bank Structure

NCUA's legacy assets plan will create a "good bank, bad bank" structure similar to a strategy previously utilized by FDIC.

Non-legacy corporate assets will transferred to new "bridge" charters at the four largest seized credit unions. Toxic assets will remain under old charters, which will be declared inactive.

Because of its size, the $1.2 billion Constitution Corporate will not receive a "bridge" charter. Rather, assets may be resolved by a purchase and assumption, said Deputy Executive Director Larry Fazio.

Also, members could apply for new charters if they wish to recapitalize any seized corporates, including U.S. Central. Small corporates who have historically repackaged U.S. Central products and services could apply for a charter even though wholesale corporates are not permitted under new regulations, he said.

"There's still value there, and it's possible surviving corporates will want to buy it back and turn it into a special purpose charter or CUSO," Fazio said. "The bridge will preserve that option, and then the system can make a decision about it."